Leadership dimensions and processes Chapter 1

1 Leadership dimensions and processes1 2008 HCPro, A Practical Guide to Finance and Budgeting, Second EditionChapter1 Leadership dimensions AND PROCESSESL earning objectivesAfter reading this Chapter , the learner will be able to: Identify the fl ow of the revenue cycle in your facility Discuss the foreign language of fi nanceToday s nurse managerThere is no question that in today s healthcare environment the role of the nurse manager is very different than it was 25 years ago. Back then, nurse managers were referred to as head nurses and were responsible for leading their area or unit in a much different capacity than is expected today. Head nurses were primarily responsible for providing patient care and run-ning the unit and were often considered working supervisors. Fast forward to the present and the term head nurse is virtually extinct. This is not to say that the duties of head nurses no longer exist; on the contrary, they have multiplied.

2 Now you fi nd those responsible for overseeing the same tasks as head nurses don-ning titles such as nurse managers, directors, coordinators, and service-line leaders, with each title dependent on the hospital in which they work. Chapter 12 2008 HCPro, Practical Guide to Finance and Budgeting, Second Edition leaders, regardless of their titles, are responsible for managing and guiding their units 24 hours a day, seven days a week. Nowadays, additional skills beyond the clinical base are necessary to do the job. This book will discuss and explain one of the necessary skills for the successful nurse manager : fi nancial management. ResponsibilitiesThe authority and responsibilities of nurse managers differ from organization to organization. However, there are some core competencies that consistently are required of you. Interpersonal skills, resource management, time management, communication skills, and a clinical background are all part of the nurse manager s repertoire.

3 Some of the essential functions expected of the nurse manager include the following: Develop a practical annual budget for a unit or department that includes volume, revenue, personnel, supplies, and capital equipment Give weekly or monthly reports of budgetary variances to your supervisor and review end-of-year data with the fi nance department and the chief nurse executive (CNE) Ensure proper, effi cient operations and monitor trends regarding staff, material, and supply usage Communicate fi scal management expectations and outcomes to your staff and other stakeholdersEducation and trainingThe majority of the nurse manager s education focuses on clinical nursing. Because you have picked up this book, it s safe to assume that you are just one of the many clinically profi cient staff nurses who have been promoted to nurse manager without any formal or informal busi-ness or fi nancial experience or training.

4 This side of nurse managing likely causes the most strife and warrants the most education. Whether you go out and get this training or your hospital makes it available to you, learning the skills necessary to be a manager is vital to your career. To become a successful fi nancial Leadership dimensions and processes3 2008 HCPro, A Practical Guide to Finance and Budgeting, Second Editionmanager, you must know and learn tasks such as creating and presenting budgets, reading fi nancial statements, and managing the fi nancial aspects of the units. Of course, this is not to say that you should forsake your clinical training. On the contrary, use it to your fullest advantage. As a nurse with business acumen and fi nance knowledge, you will carry a particularly important position, because you can inject your clinical knowledge into the budgeting process.

5 By doing so, you help ensure that patients continue to get safe, quality care even when budget cuts must be made. To do so, begin by learning what makes the fi nancial hearts of hospitals and healthcare organizations is a businessNow that you are a fi nancial manager , the main point to remember is that hospitals and other healthcare organizations are businesses. And for businesses to be successful, they must make a profi t on the goods or services they offer or sell. Many hospitals are not-for-profi t. Such organizations generally use earnings to construct new buildings, provide raises for staff, or buy new equipment. For-profi t hospitals essentially spend their earnings on the same things; however, they have the additional expense of paying back shareholders. As with every business, there are certain politics that dictate hospitals operations. Therefore, you, as a fi nancial manager , must understand the politics behind healthcare economics.

6 The politics of healthcare economics Many factors affect the cost of healthcare today. Both nationally and at the state level, the number of people who are uninsured or underinsured is on the rise. More than 47 million people went without health insurance in 2006, including million children, according to data released by the United States Census Bureau in state of the economy plays a large role in increasing healthcare costs. During rough eco- nomic times, many consumers must make the harsh decision of whether to put food on the table or pay for healthcare. As you can imagine, many neglect their health until they are ill, enter-ing the healthcare system through the emergency department, which increases costs signifi cantly. Chapter 14 2008 HCPro, Practical Guide to Finance and Budgeting, Second Edition major factor in increasing healthcare costs is the overall shortage of healthcare work-ers in the nation particularly RNs.

7 When hospitals have high RN vacancy rates, they must resort to alternatives such as using costly contract/agency staff and offering incentive programs such as sign-on bonuses. They also use traveling nurses, those on a minimum 13-week assign-ment, to fi ll open slots within hospitals at a higher rate of pay. These actions are short-term solutions and signifi cantly increase hospital expenditures. Technology and pharmaceuticals The cost of technology plays a major role in the cost of healthcare, and there has been an explosion of available technology in the past 20 years. The more technology that is available, the more there is a need for specialists to run the technology. Hospitals, competing for the best physicians to come on staff to attract more patients, buy expensive technologies. In the past, hospitals were paid by the various health insurers each time a procedure was per-formed with new equipment.

8 Today, with managed care and diagnosis-related groups (DRGs), procedures are not reimbursed separately; rather, the hospital receives a fl at-rate reimburse-ment, thus increasing the costs of healthcare. Hospitals feel it is necessary to have the most current technology to attract patients and physicians, but it can be costly. In addition, with increased litigation in the industry, physicians are more apt to order pricey, high-tech tests to ensure they have covered all bases to avoid a lawsuit. They essentially order tests for the benefi t of the medical record, not for the patient. The number of new medications developed in the pharmaceutical industry has skyrocketed over the past 20 years, thus increasing the cost of healthcare. As these drugs are available and used by physicians, it adds to the costs of patient care. This is because the costs to develop, test, and approve new medications are high, and it can take years before a medication reaches the marketplace.

9 When the medication is fi nally available to the public, manufacturers must charge enough to cover these costs and pay their stockholders, who expect to see a return on their investment. The price of drugs does not drop signifi cantly until companies begin to sell generic versions of a high-priced drug (National Coalition on Health Care 2007). Leadership dimensions and processes5 2008 HCPro, A Practical Guide to Finance and Budgeting, Second EditionHealthcare spendingUnderstanding how the United States spends its money on healthcare and how it relates to the gross domestic product (GDP) is important. Figure from the Centers for Medicare & Medicaid Services (CMS), Offi ce of the Actuary, National Health Statistics Group 2007, shows the national health expenditures and their share of the GDP, 1980 2015. This informa-tion provides a big-picture perspective of how expensive healthcare is and is becoming!

10 National health spending is projected to increase as a share of GDP over the next decade. Resources are limited, reimbursement is decreasing, and it has become imperative that nurse leaders control and/or manage costs on their big-picture perspective affects healthcare costs on a national scale. Each state has its own challenges and issues, and reimbursement by payer type may differ. In 2005, healthcare spend-ing in the United States reached $2 trillion, and that amount is projected to reach $ trillion in 2009 (National Coalition on Health Care 2007).As the baby boomer generation ages, approximately 77 million people will begin to use healthcare services, and we can expect the related healthcare costs to continue to : Centers for Medicare & Medicaid Services, Offi ce of the Actuary, National Health Statistics Group 2007. An overview of the Health Care System Chart Book.